Aggregate Farm Level Impacts of the Farm Bill on the South 2002 Southern Region Agricultural Outlook...

Aggregate Farm Level Impacts of the Farm Bill on

the South

2002 Southern Region Agricultural Outlook ConferenceTunica, MississippiSeptember 24, 2002

Joe L. OutlawAssociate Professor and Extension Economist Agricultural and Food Policy CenterTexas A&M Universitywww.afpc.tamu.edu

Assumptions for 2002 – 2007 Analysis of Farm Bill

ImpactsContinuation of 2002 Farm Bill through 2007No more Market Loss Assistance payments after 2001Farmers update base and yields to maximize government paymentsFarms structured so payment limits are not bindingFAPRI July 2002 Baseline provides

Average annual pricesInflation rates for purchased inputsInterest ratesInflation rates for land

Historical yield and price risks used to incorporate risk.

Initial Debt Levels on Farms

Representative farms borrow all of their operating capital.

Real estate debt on January 1, 2001 assumed to be:20% Feed grains20% Wheat20% Cotton20% Rice30% Dairy 1% Beef cattle35% Hogs

Machinery and livestock debt is 20% for all farms.

Representative Farms and Ranches Used for the Analysis of the 2002 Farm Bill

Rice

Dairy

Wheat

Rice

CottonDairy

Dairy

Cattle

Cattle

CattleWheat

Dairy

FeedGrain

CottonCotton

Dairy

DairyFeed Grain

Cotton

Cotton

RiceRice

Wheat

Wheat

Wheat

FeedGrain

Feed Grain

Feed GrainFeed Grain

DairyCattle

Rice

HogHog

Hog

Dairy DairyDairy Dairy

Dairy

Dairy

Feed Grain

CottonFeedGrain

Dairy

Dairy

Dairy

Dairy

Cattle

Cattle

Cattle

RiceCotton

Rice Cotton

Cotton

Cattle

Hog

Cotton

Rice

Cotton

Dairy

Definition of Output Variables

Probability of Cash Flow Deficits – chance that net cash farm income is less than family living, taxes, principal payments, and machinery replacement costs.

Probability of Losing Real Net Worth – chance that net worth, adjusted for inflation, is less than net worth at the end of 2001.

Definition of Overall Financial Position

Good – Less than 25% chance of cash flow deficits and losing real net worth.

MarginalMarginal – A 25 - 50% chance of cash flow deficits and losing real net worth.

Poor – Greater than 50% chance of cash flow deficits and losing real net worth.

REPRESENTATIVE FARMS PRODUCING FEED GRAINS

IA

NEMON

MOC

TN

SC

TXB

TXNP

Economic Viability of Representative Feed Grain Farms Under

Continuation of the 1996 Farm Bill

Farm Name P(Cash Flow Deficit) P(Real Net Worth Declines)

1/1/6 2002-2006 2002-2006

TXNP1600 44 – 58 1 – 34

TXNP6700 55 – 44 1 – 17

TXBG2000 98 – 99 1 – 95

TXBG2500 92 – 98 1 – 86

TNG900 99 – 99 1 – 94

TNG2400 30 – 60 1 – 40

SCG1500 77 – 77 1 – 45

SCG3500 40 – 24 1 – 3

< 25% 25-50% >50%

Economic Viability of Representative Feed Grain Farms Under

Continuation of the 2002 Farm BillFarm Name P(Cash Flow Deficit) P(Real Net Worth

Declines)

3/3/2 2002-2007 2002-2007

TXNP1600 17 – 23 1 – 2

TXNP6700 8 – 13 1 – 1

TXBG2000 76 – 85 1 – 56

TXBG2500 36 – 39 1 – 12

TNG900 13 – 6 1 – 1

TNG2400 11 – 27 1 – 1

SCG1500 84 – 75 1 – 36

SCG3500 30 – 30 1 – 1

< 25% 25-50% >50%

CA

TN

TXSP

TXRP

TXB

TXCB

AR

LA

AL

NC

GA

REPRESENTATIVE FARMS PRODUCING COTTON

Economic Viability of Representative Cotton Farms Under Continuation of the 1996 Farm Bill


0/5/6 2002-2006 2002-2006

TXSP1682 28 – 37 1 – 15

TXSP3697 30 – 30 1 – 6

TXRP2500 75 – 90 1 – 77

TXBC1400 43 – 61 1 – 39

TXCB1720 42 – 51 1 – 31

LAC2640 73 – 76 1 – 83

ARC5000 31 – 53 1 – 4

TNC1900 35 – 27 1 – 1

TNC4050 56 – 54 1 – 46

ALC3000 46 – 50 1 – 25

NCC1500 93 - 99 1 - 99

< 25% 25-50% >50%

Economic Viability of Representative Cotton Farms Under Continuation of the 2002 Farm Bill


6/5/0 2002-2007 2002-2007

TXSP2239 16 – 16 1 – 1

TXSP3448 40 – 16 1 – 1

TXRP2500 49 – 68 1 – 23

TXBC1400 6 – 12 1 – 1

TXCB1850 31 – 37 1 – 2

LAC2640 43 – 28 1 – 5

ARC5000 0 – 4 1 – 1

TNC1900 1 – 1 1 – 1

TNC4050 21 – 24 1 – 1

ALC3000 18 – 35 1 – 1

NCC1500 15 – 87 1 – 23

< 25% 25-50% >50%

CA

TXB

MO

ARM

LAS

MS

LAN

ARH

TX TXE

REPRESENTATIVE FARMS PRODUCING RICE

Economic Viability of Representative Rice Farms Under Continuation of the 1996 Farm Bill


0/2/4 2002-2006 2002-2006

TXR1553 81 – 94 1 – 97

TXR3774 57 – 54 1 – 22

LASR1200 96 – 99 1 – 99

LANR2500 99 – 99 1 – 99

ARR3640 26 – 37 1 – 4

MSR4735 97 – 99 1 – 99

< 25% 25-50% >50%

Economic Viability of Representative Rice Farms Under Continuation of the 2002 Farm Bill

< 25% 25-50% >50%


6/4/0 2002-2007 2002-2007

TXR1553 51 – 42 1 – 18

TXR3774 34 – 18 1 – 2

TXBR1650 76 – 47 1 – 26

TXER3200 15 – 16 1 – 2

LASR1200 16 – 23 1 – 6

LANR2500 75 – 58 1 – 23

ARSR3640 15 – 9 1 – 1

ARWR1200 84 – 49 1 – 17

ARHR3000 27 – 23 1 – 4

MSR4735 51 – 42 1 – 10

WA

ID

CA

NM TXE

TXC

MO

FLS

FLN

GAN

GAS

WIMICMIE

NYC

NYW

VT

TXN

REPRESENTATIVE FARMS PRODUCING MILK

Economic Viability of Representative Dairy Farms Under Continuation of the

1996 Farm Bill


3/1/4 2002-2006 2002-2006

TXCD400 99 – 99 1 – 94

TXCD825 5 – 3 1 – 1

TXED310 74 –65 1 – 36

TXED750 50 – 29 1 – 16GAND200 99 – 99 1 – 99

GASD700 27 – 16 1 – 1

FLND500 21 – 13 1 – 1

FLSD1800 87 – 82 1 – 62

< 25% 25-50% >50%

Economic Viability of Representative Dairy Farms Under Continuation of the

2002 Farm Bill


3/3/3 2002-2007 2002-2007

TXCD400 94 – 98 1 – 89

TXCD825 1 – 1 1 – 1

TXED310 51 – 33 1 – 3

TXED750 53 – 28 1 – 2

TXND2400 33 – 35 1 – 6GAND200 99 – 99 1 – 56

GASD700 41 – 42 1 – 6

FLND500 11 – 4 1 – 1

FLSD1800 99 – 92 1 – 65

< 25% 25-50% >50%

IL IN

NC

IA

REPRESENTATIVE FARMS PRODUCING HOGS

Economic Viability of Representative Hog Farms Under Continuation of the 1996 Farm Bill

Farm Name P(Cash Flow Deficit)

P(Real Net Worth

Declines)

2/0/0 2002-2006 2002-2006

NCH350 13 – 3 1 – 1

NCH13268 14 – 5 1 – 2

< 25% 25-50% >50%

Economic Viability of Representative Hog Farms Under Continuation of the 2002 Farm Bill

Farm Name P(Cash Flow Deficit)

P(Real Net Worth

Declines)

2/0/0 2002-2007 2002-2007

NCH350 92 – 1 1 – 1

NCH13268 81 – 1 1 – 1

< 25% 25-50% >50%

Comparison of 1996 Farm Bill to 2002 Bill for Southern Crop Farms

Cash Flow 1996 Farm Bill 2002 Farm Bill

Good 1 of 25 14 of 29

Moderate 6 of 25 10 of 29

Poor 18 of 25 5 of 29

Overall Viability

Good 1 of 25 15 of 29


Poor 16 of 25 2 of 29

Comparison of 1996 Farm Bill to 2002 Bill for Southern Livestock

Farms

Cash Flow 1996 Farm Bill 2002 Farm Bill

Good 5 of 10 4 of 11


Poor 4 of 10 3 of 11

Overall Viability

Good 5 of 10 5 of 11


Poor 4 of 10 3 of 11

Conclusions

Relative to December 2001 Baseline

•Significant improvement in economic viability across all crop farms

•Still considerable cash flow pressure

•Very little pressure on equity as land values stem the slide

•Improvement in economic viability of dairy operations

•Considerable cash flow pressure

•Some equity pressure

•Hog operations marginally worse

•Considerable cash flow pressure

Aggregate Farm Level Impacts of the Farm Bill on the South 2002 Southern Region Agricultural Outlook...

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